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Seattle’s Theraclone Strikes $18M Deal to Make Flu-Fighting Antibodies with Japanese Company

Theraclone Sciences has formed a partnership with a Japanese drug company, worth as much as $18 million over time, to discover new antibodies that could broadly protect millions of people in a flu pandemic.

Seattle-based Theraclone has formed the alliance with Tokyo-based Zenyaku Kogyo, which markets a blockbuster antibody drug for cancer and rheumatoid arthritis, called rituximab (Rituxan), in Japan. The deal calls for Theraclone to give Zenyaku an option to exclusive rights to new flu antibodies in Asia and certain Pacific Ocean countries, which can be used for treatments and vaccines. In return, Theraclone gets an undisclosed portion of the $18 million in upfront cash, and royalties on future product sales in Zenyaku’s territories. Theraclone also keeps exclusive commercial rights to the flu antibodies it discovers in the rest of the world, says CEO David Fanning.

The deal comes one month after Theraclone and its collaborators made international news when a paper in Science described how they had discovered a pair of new antibodies with ability to broadly neutralize many variations of the HIV virus that circulate around the world. Theraclone has long said that its method can be applied to the discovery of antibodies for multiple pathogens, including flu. That’s because it looks for clues from blood samples of people who are naturally protected from infection, finds the natural antibodies that seem to be protective, and then genetically engineers copies of them that can made into injectable drugs for people who lack those specific antibodies.

The global headlines couldn’t have come at a better time for Theraclone. When I interviewed Fanning for that story last month, he was in Japan negotiating the deal with Zenyaku, making a case that the HIV discovery work could also be applied to flu. It certainly didn’t hurt his position.

“That’s right, those were the guys I was meeting with then,” Fanning says with a smile.

Flu has been a top priority of public health officials this year, particularly since June 11, when the director-general of the World Health Organization, Margaret Chan, declared a global flu pandemic with 30,000 confirmed cases in 74 countries. Major flu vaccine makers like Paris-based Sanofi-Aventis have been taking immediate action to see if they can use lower doses of existing vaccine this flu season—to stretch out capacity in order to protect millions more people—but the pandemic has also sparked renewed interest at the lab bench among companies with newer ideas like Theraclone.

Theraclone is testing for antibodies with broad neutralizing capabilities against a couple of well-known protein markers on flu virus—called M2E and hemagglutinin (HA), Fanning says. If done right, these antibodies will bind with a “conserved” region on the virus that’s found on almost all of the present, and hopefully, future mutated strains of flu, Fanning says.

Since genetically engineered antibodies are expensive to manufacture, and a cheaper oral pill from Roche called oseltamivir (Tamiflu) is already available against most kinds of flu, I wondered why anybody would want an antibody alternative. It’s not practical to give tens or hundreds of millions of people an antibody drug that’s likely to cost thousands of dollars per person.

For starters, Tamiflu doesn’t appear to work against all strains, and the government has an interest in stockpiling a bigger gun just in case it’s needed, Fanning says. In the case of a flu pandemic, the antibody could be given to about 6 million first-line responders—doctors, nurses, paramedics, police—to keep them from contracting the virus and spreading it more widely, Fanning says.

Unlike a vaccine, which typically takes two weeks to build up protective immunity, an antibody treatment would be useful in a pandemic because it can start kicking in immediately, and could be given to first responders right before an expected exposure, or right after, Fanning says. It might also be used for elderly people with weak immune systems who don’t respond well to vaccines, or immune-compromised patients, like those who have undergone organ transplants, Fanning says. An antibody treatment typically has a shelf life of a year or two, he says.

Whether those markets materialize for Theraclone or not, the Japanese deal is important to the present because it provides immediate cash to support the company’s antibody discovery group, which makes up 18 of its 21 employees. That group is also supported by the International AIDS Vaccine Initiative, and was built largely with a $29 million venture investment in March 2007 from Arch Venture Partners, Canaan Partners, Healthcare Ventures, Amgen Ventures, MPM Capital, and Alexandria Real Estate Equities.

Fanning didn’t say how much cash Theraclone has left in the bank, but like a lot of biotech startup CEOs, he needs to find cash from sources other than the VCs. That’s why this deal is important.

“It’s a great relief for us in this environment and helps us to conserve cash,” Fanning says.